DNOW DNOW Inc

Earnings Conference Call August 7, 2024 8:00 a.m. CT 1 (888) 660-6431 (within North America) 1 (929) 203-2118 (outside of North America) Access Code: 7372055 Webcast: ir.dnow.com

DNOW Inc. (NYSE: DNOW) announced results for the second quarter ended June 30, 2024.

Second Quarter 2024 Highlights

• Revenue was $633 million for the second quarter of 2024
• Net income attributable to DNOW Inc. was $24 million, or $0.21 per diluted share, for the second quarter of 2024
• Non-GAAP net income attributable to DNOW Inc. excluding other costs was $28 million, or $0.25 per diluted share, for the second quarter of 2024

• EBITDA excluding other costs was $50 million or 7.9% of revenue for the second quarter of 2024
• Cash provided by operating activities was $21 million for the second quarter of 2024 and $211 million for the trailing four quarters ending June 30, 2024
• Repurchased $10 million of common stock in the second quarter of 2024
• Cash and cash equivalents was $197 million and long-term debt was zero at June 30, 2024 with total liquidity of approximately $579 million

David Cherechinsky, President and CEO of DNOW, added, “We are delighted with the growth we achieved during the second quarter, in a challenging market, where we delivered $50 million in EBITDA and produced $18 million in free cash flow, bringing our free cash flow haul to $201 million over the past four quarters. We opportunistically repurchased $10 million in shares in the quarter and are on a path to complete the $80 million share repurchase program this year.

We continue to execute on our strategy to bolster DNOW’s capabilities and expand our core market, while further penetrating into midstream, energy evolution and adjacent industrial markets, providing additional opportunities for growth. The future remains bright thanks to our dedicated, skilled and passionate employees who work tirelessly and successfully to help solve our customers’ complex operational and supply chain challenges.

With $197 million in cash, no debt and $579 million of total liquidity, we continue to pursue complementary, margin accretive acquisitions where the combination would maximize shareholder value and fuel future DNOW success.”

Prior to the earnings conference call a presentation titled “DNOW Second Quarter 2024 Key Takeaways” will be available on the Company’s Investor Relations website.

About DNOW

DNOW is a worldwide supplier of energy and industrial products and packaged, engineered process and production equipment with a legacy of over 160 years. Headquartered in Houston, Texas, with approximately 2,600 employees and a network of locations worldwide, we offer a broad set of supply chain solutions combined with a suite of digital offerings branded as DigitalNOW® that provide customers world-class technology for digital commerce, data and information management. Our locations provide products and solutions to exploration and production, midstream transmission and storage companies, refineries, chemical companies, utilities, mining, municipal water, manufacturers, engineering and construction as well as companies operating in the decarbonization, energy transition and renewables end markets.

Statements made in this press release that are forward-looking in nature are intended to be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by DNOW Inc. with the U.S. Securities and Exchange Commission, which identify significant risk factors which could cause actual results to differ from those contained in the forward-looking statements.

 

DNOW INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 

June 30, December 31,

2024

 

2023

  ASSETS Current assets: Cash and cash equivalents

$

197

 

$

299

 

Receivables, net

 

403

 

 

384

 

Inventories, net

 

399

 

 

366

 

Prepaid and other current assets

 

24

 

 

19

 

Total current assets

 

1,023

 

 

1,068

 

Property, plant and equipment, net

 

139

 

 

131

 

Deferred income taxes

 

105

 

 

118

 

Goodwill

 

192

 

 

139

 

Intangibles, net

 

57

 

 

28

 

Other assets

 

47

 

 

45

 

Total assets

$

1,563

 

$

1,529

 

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable

$

278

 

$

288

 

Accrued liabilities

 

123

 

 

120

 

Other current liabilities

 

11

 

 

10

 

Total current liabilities

 

412

 

 

418

 

Long-term operating lease liabilities

 

32

 

 

30

 

Other long-term liabilities

 

20

 

 

18

 

Total liabilities

 

464

 

 

466

 

Commitments and contingencies Stockholders' equity: Preferred stock - par value $0.01; 20 million shares authorized; no shares issued andoutstanding

 

−

 

 

−

 

Common stock - par value $0.01; 330 million shares authorized; 106,549,496 and 106,257,565shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

 

1

 

 

1

 

Additional paid-in capital

 

2,028

 

 

2,032

 

Accumulated deficit

 

(783

)

 

(828

)

Accumulated other comprehensive loss

 

(151

)

 

(145

)

DNOW Inc. stockholders' equity

 

1,095

 

 

1,060

 

Noncontrolling interest

 

4

 

 

3

 

Total stockholders' equity

 

1,099

 

 

1,063

 

Total liabilities and stockholders' equity

$

1,563

 

$

1,529

 

DNOW INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions, except per share data)

 

Three Months Ended Six Months Ended June 30,   March 31, June 30,

2024

2023

 

 

2024

2024

2023

 

    Revenue

$

633

$

594

 

 

$

563

$

1,196

$

1,178

 

Operating expenses:   Cost of products

495

 

460

 

 

 

434

 

929

 

907

 

Warehousing, selling and administrative

 

105

 

98

 

 

 

101

 

206

 

200

 

Operating profit

 

33

 

36

 

 

 

28

 

61

 

71

 

Other income (expense)

 

−

 

(1

)

 

 

1

 

1

 

(1

)

Income before income taxes

 

33

 

35

 

 

 

29

 

62

 

70

 

Income tax provision

 

8

 

1

 

 

 

8

 

16

 

4

 

Net income

 

25

 

34

 

 

 

21

 

46

 

66

 

Net income attributable to noncontrolling interest

 

1

 

−

 

 

 

−

 

1

 

1

 

Net income attributable to DNOW Inc.

$

24

$

34

 

 

$

21

$

45

$

65

 

Earnings per share attributable to DNOW Inc. stockholders:   Basic

$

0.21

$

0.31

 

 

$

0.20

$

0.41

$

0.59

 

Diluted

$

0.21

$

0.31

 

 

$

0.19

$

0.41

$

0.59

 

Weighted-average common shares outstanding, basic

 

107

 

107

 

 

106

 

107

 

108

 

Weighted-average common shares outstanding, diluted

 

108

 

108

 

 

107

 

107

 

109

 

DNOW INC.

SUPPLEMENTAL INFORMATION

 

BUSINESS SEGMENTS (UNAUDITED)

(In millions)

 

Three Months Ended Six Months Ended June 30, March 31, June 30,

2024

2023

2024

2024

2023

Revenue: United States

$

512

$

456

$

435

$

947

$

883

Canada

 

56

 

66

 

66

 

122

 

149

International

 

65

 

72

 

62

 

127

 

146

Total revenue

$

633

$

594

$

563

$

1,196

$

1,178

DNOW INC.

SUPPLEMENTAL INFORMATION (CONTINUED)

U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP RECONCILIATIONS

NET INCOME ATTRIBUTABLE TO DNOW INC. TO NON-GAAP EBITDA EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

(In millions)

 

Three Months Ended Six Months Ended June 30,   March 31, June 30,

2024

 

2023

 

 

2024

 

2024

 

2023

 

    GAAP net income attributable to DNOW Inc. (1)

$

24

 

$

34

 

 

$

21

 

$

45

 

$

65

 

Net income attributable to noncontrolling interest (2)

 

1

 

 

−

 

 

 

−

 

 

1

 

 

1

 

Interest expense (income), net

 

(1

)

 

−

 

 

 

(2

)

 

(3

)

 

(1

)

Income tax provision

 

8

 

 

1

 

 

 

8

 

 

16

 

 

4

 

Depreciation and amortization

 

9

 

 

6

 

 

 

7

 

 

16

 

 

12

 

Other costs:   Stock-based compensation

 

4

 

 

4

 

 

 

2

 

 

6

 

 

7

 

Other (3)

 

5

 

 

2

 

 

 

3

 

 

8

 

 

6

 

EBITDA excluding other costs

$

50

 

$

47

 

 

$

39

 

$

89

 

$

94

 

EBITDA % excluding other costs (4)

 

7.9

%

 

7.9

%

 

 

6.9

%

 

7.4

%

 

8.0

%

NET INCOME ATTRIBUTABLE TO DNOW INC. TO NON-GAAP NET INCOME ATTRIBUTABLE TO DNOW INC. EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

 

Three Months Ended Six Months Ended June 30, March 31, June 30,

2024

2023

2024

2024

2023

  GAAP net income attributable to DNOW Inc. (1)

$

24

$

34

 

$

21

$

45

$

65

 

Other, net of tax (5) (6)

 

4

 

(7

)

 

2

 

6

 

(10

)

Net income attributable to DNOW Inc. excluding other costs (6)

$

28

$

27

 

$

23

$

51

$

55

 

DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO DNOW INC. STOCKHOLDERS TO NON-GAAP DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO DNOW INC. STOCKHOLDERS EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

 

Three Months Ended Six Months Ended June 30, March 31, June 30,

2024

2023

2024

2024

2023

  GAAP diluted earnings per share attributable to DNOW Inc. stockholders (1)

$

0.21

$

0.31

 

$

0.19

$

0.41

$

0.59

 

Other, net of tax (5) (6)

 

0.04

 

(0.06

)

 

0.02

 

0.05

 

(0.09

)

Diluted earnings per share attributable to DNOW Inc. stockholders excluding other costs (6)

$

0.25

$

0.25

 

$

0.21

$

0.46

$

0.50

 

(1)

In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in our quarterly earnings press releases and other public disclosures. The non-GAAP financial measures include: (i) earnings before interest, taxes, depreciation and amortization (EBITDA) excluding other costs, (ii) net income attributable to DNOW Inc. excluding other costs and (iii) diluted earnings per share attributable to DNOW Inc. stockholders excluding other costs. Each of these financial measures excludes the impact of certain other costs and therefore has not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included in the schedules herein.

(2)

Net income attributable to noncontrolling interest represents the income retained by the noncontrolling party of a joint venture in our international segment which we consolidate into our financials as we are the primary beneficiary and controlling member.

(3)

Other includes certain income and expenses and does not include stock-based compensation expense.

For the three and six months ended June 30, 2024, Other was primarily related to transaction-related charges, of which approximately $1 million and $3 million, respectively, were included in warehousing, selling and administrative, and approximately $4 million and $5 million, respectively, were included in cost of products. Transaction-related charges include transaction costs, inventory fair value step-up, retention bonus accruals and integration expenses associated with acquisitions.

(4)

EBITDA % excluding other costs is defined as EBITDA excluding other costs divided by Revenue.

(5)

Other, net of tax includes certain income and expenses and does not include stock-based compensation expense.

For the three and six months ended June 30, 2024, Other, net of tax, included approximately $4 million and $6 million, respectively, related to transaction-related charges.

(6)

Totals may not foot due to rounding.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240807073786/en/

Mark Johnson Senior Vice President and Chief Financial Officer (281) 823-4754